Merck Frosst Canada Ltd. v. Minister of Health – Part III

In Merck Frosst v. Canada, 2012 SCC 3, the forefront of the debate rests on the balance between commercial confidentiality and government transparency. In this 6-3 ruling, the Supreme Court of Canada (“SCC”) establishes a clear framework governing the disclosure of trade secrets, confidential information and commercially sensitive information filed with Health Canada for drug regulatory approval. As discussed in Part 1 and Part 2 of this series, the majority eventually dismisses Merck’s appeal, ordering the disclosure of all the information in question; yet, the overall decision should be welcomed by innovator pharmaceutical companies as the SCC is not making it tougher to protect commercial information from disclosure under the Access to Information Act (“Act”).

The dissenting opinion, penned by Justice Deschamps, with Justices Abella and Rothstein concurring, offers a pragmatic approach to evaluating whether information should be exempted from disclosure. Unless the trial judge committed a “palpable and overriding error” to justify intervention at the appellate court, the Federal Court decision should be granted judicial deference. Her reasons are compelling: she concedes that appellate courts are not equipped with the expertise and knowledge needed to readily understand the information, and reviewing such highly technical evidence at the appellate level will only import a high risk of error. She emphasizes the fact that the trial judge (Beaudry J.) spent four days hearing the case and asking questions about specific documents, leading to her conclusion that the trial judge is likely to have better insights, especially compared to the Federal Court of Appeal and the SCC. Furthermore, Deschamps J. states:

“Health Canada and Merck fought tooth and nail for over 5 years before being heard by Beaudry J. Access to information may be becoming the favorite battleground of innovative and generic drug manufacturers. The quantity of resources, both public and private, expended as a consequence of the war between the parties in the case at bar is appalling. This may be a sign of a more wide-scale problem.”

Deschamps J. aptly illustrates the gist of the matter here. With this pervasive problem in the pharmaceutical industry, it is imperative for the court to deliver a practical, analytical framework in order to help the companies reach a truce in the future. Deschamps J. contrives a categorical approach to determine which records are exempted from disclosure under the Act. First, Health Canada and the innovator company must act early and responsibly to come to an agreement of the disclosed information. Next, the documents can be redacted by reasons of established categories. Deschamps J. notes that “it is clear that the word-by-word approach is not working in cases such as the one at bar.” If any dispute remains among the parties, then a reviewing judge should be able to settle the disagreement without the requirement to provide a word-by-word or page-by-page explanation for his or her decision. The judge can simply address the case on the basis of categories, provided that the judgment makes it clear which documents or categories of documents are exempt. Unless there is a palpable and overriding error, the Federal Court of Appeal should refrain from reviewing factual findings.

The reasoning provided by Deschamps J. is meritorious – given the technical facts of this case, it is important for a judge to fully understand the documents when determining exemptions. Technical information read by a non-expert might mean nothing, yet it could be considerably significant when interpreted by an expert in the field. Beaudry J.’s findings on the exemptions were fact-based or findings of mixed fact and law, so deference should be owed to them. Furthermore, as the majority’s decision ultimately turns on the facts of the case rather than one of legal principle, it might be more appropriate to remit the matter to the Federal Court for reconsideration.

The categorical approach suggested by Deschamps J. offers an expedited way of granting or rejecting access to information requests – this is notable because, as inferred by Deschamps J.’s reasoning, the parties have been fighting for over 10 years to settle this access to information request. Since the exclusive right granted to a patent holder is limited to a period of 20 years from the date of filing, and patent application is typically filed before any clinical trials are conducted, it is possible that the patent for Singulair® has expired or is expiring soon. A quick search on the Canadian Patents Database indicated that the original patent is already expired; however, it is still possible to extend this 20-year exclusivity through a subsequent patent claiming another novel property of the drug.

The implications of this decision are wide-ranging. While Health Canada and Merck Frosst are the parties, the decision could affect generic companies, health professionals, patients, and scientific researchers. For the purpose of this discussion, Health Canada could be said to represent the general public: namely, health professionals, patients, and scientific researcher. Merck Frosst is the innovator pharmaceutical company. Generic companies are the competitors of the innovator drug companies.

In the world of drug regulation, open information is particularly important for health professionals, patients, or researchers who need the confidential records to evaluate and understand the risks of a drug. Without this information, public health could be based upon speculation. The purpose of the Access to Information Act is to provide a broad right of access to government information, subject to very limited exceptions. The Act serves to promote government transparency, thus engaging and facilitating public scrutiny. Therefore, secrecy surrounding the drug regulatory process should be avoided. While one might argue that Parliament intended to provide exemptions from disclosure under the Act, Parliament also chose to draft an overriding provision in s. 20(6), which allows disclosure of some otherwise confidential information if “the disclosure would be in the public interest as it relates to public health.” It is indubitably apparent that an asthma drug would be related to public health, and that such information ought to be disclosed. However, the access to information requester is often not a health professional but a generics company attempting to gather information on an innovator’s product in order to mimic it.

It is undisputed that the development of a drug costs a significant amount of money. Clearly, the innovator pharmaceutical company should be able to recoup the costs of research, clinical trials, and other development processes. To recover its investment, the innovator drug company depends upon patent protection in order to enjoy a limited period of market exclusivity. Parliament created the patent system to stimulate innovation by awarding a 20-year monopoly to the inventor.  In exchange, the inventor must provide full and complete disclosure of the product information. For various strategic reasons, the inventors might be inclined to draft the patent more broadly in order to gain a wider ambit of protection. Thus, the publicly available patent could lack the specificity that one requires to dissect the safety and efficacy of a drug. Information submitted to government institutions for drug regulatory approval would contain some of the useful data that the innovator viewed as “confidential”.  Therefore, when an access to information request is made, the innovator drug company would have to rely on the exemptions under the Act to preclude disclosure of the information. Generic companies do not incur any cost in the discovery phase of the drug, which allow them to sell the drug at a much lower price. Lower drug prices benefit patients. However, without the ingenuity provided by the innovator pharmaceutical company, generic drugs would never see the light of day. As Cromwell J. cautions in the opening paragraphs of his judgment, “Routine disclosure of information might even ultimately discourage research and innovation.”

Clearly, the debate is endless. After Merck Frosst v. Canada, information will be exempted from disclosure as long as the innovator company provides evidence that disclosure can reasonably be expected to give rise to harm and prejudice. However, proving a prejudicial position should not be difficult, as the majority of the SCC has already conceded in this case that disclosure could accelerate a generic company’s entry into the market, thereby causing prejudice to Merck’s competitive position.